When are subsidies to trans-European network projects justified?

The trans-European transport network (TEN-T) encompasses the major planned transport infrastructure in Europe, ranging from high speed rail to port infrastructure. Projects in this category are considered priority projects and receive European subsidies; but these have been insufficient to get these projects off the ground. This paper addresses two research questions. First, it sketches the basic economics of cross-boundary infrastructure projects: what pricing and investment policies can we expect, what is the role of through traffic and high fixed costs of infrastructure? Second, it examines briefly what lessons the EU could draw from the experience of other existing federal funding institutions like the US and Germany. These ideas are used to propose a new subsidy scheme for the TEN-T projects.

Research highlights
► Paper analyzes pricing and investment of transboundary transport projects.
► A more efficient subsidy scheme for the TEN-T projects in the EU is proposed.
► What incentives can limit the pork barrel politics in transport infrastructure.
► When to allow member states to charge through traffic for infrastructure use?